Sainsbury In Egypt Case Solution

2. Analysis of Internal Environment     

An analysis of the company’s internal environment shows why Sainsbury entered the Egyptian market. An internal analysis of the company’s internal environment is done through the SWOT analysis (Gasparotti, 2009). For Sainsbury in Egypt, this section provides a brief SWOT analysis of the retail chain’s operations in Egypt.

i. Strengths

The company had a strong brand name that it could leverage in the Egyptian food retail market. With success experiences of expansions of operations in the USA markets, the company felt confident in entering the Egyptian market where it saw a lot of future potentials. Moreover, since the company was a leading food retailer in the UK and had experienced mounting success in the USA, it was not short on the financial muscle to expand in Egypt. With a store opening every eight days, the company displayed its superiority in infrastructure building and resources. The products it offered were of high quality and attracted elite consumers. The international hype of the store also attracted other local consumers to step in and go through the purchase experience at a retail grocery store. Moreover, the localization of stores and cost effectiveness allowed Sainsbury to influence a higher customer base. 

ii. Weaknesses

The company, though well equipped with the economics of the expansion, neglected the cultural differences that existed. Sainsbury management did not have the foresight of looking at any cultural differences that might have occurred. This is evident in the company’s discount policies, which failed to influence consumers’ shopping habits. Moreover, the company also hired expatriates instead of locals in the management hierarchy, which furthers the cultural differences between the lower staff hired, which was Egyptian, and the management. The potential forecast of the market was also faulty to an extent – though having large potential; the population of 65 million had a low gross domestic product (GDP) per head of about $1,300 – marking the country as largely being poor and disorganized. 

iii. Opportunities        

The market was still large, and the food retail sector had not been explored to its full capacity. Sainsbury, having the first mover advantage, could develop the market and create a loyal customer base. The support of the local government could also be used for further expansions. 

iv. Threats    

The growing local competition against Sainsbury, which also exploited the religious and political sentiments of the people to incite them against shopping at Sainsbury, was an increasing threat. Lack of social and educational development also posed as a probable threat to Sainsbury’s operations. 

3. Analysis of External Environment

An analysis of the external environment allows the company to evaluate further compatibility in a foreign country about its internal strengths and weaknesses (Deac and Duna, 2012). This is done through the PESTLE framework, which is applied to the Egypt in this section, with context to Sainsbury.

i. Political

The Egyptian environment was charged politically to a great extent because of its geographic location in the Middle East. The political system was civil though influenced strongly by theocratic laws. The country had a strong influence of Muslim clerics who were not for western companies and their offerings. Despite the fact that the formal government was supportive of Sainsbury’s operations because of the fact that it brought in a considerable amount of FDI, other political elements in the country failed to accept the development. However, the entry mode was easy for the retail chain where it partnered with the local Edge retail group. 

ii. Economic

The economic landscape of the country was on the brim of becoming better. The wealth was distributed amongst a few, and the majority of the masses comprised of the lower middle and the lower classes, which did not have the purchasing power to afford ‘luxury’ groceries. The low GDP of the country was unable to support its humungous population, characterizing Egypt as being an emerging market – which may have potential in the future if investments were made acutely in the present.

iii. Social    

The social landscape was coloured to a large extent by the political situation and circumstances of the local region i.e. the Middle East. Moreover, the country was also socially under developed, with infrastructure being at its best in few cities, such as Cairo only. The rest of the country where a large size of the masses resided was deprived, uneducated for the most part and unstable with low levels of uncertainty avoidance. The trend to move towards grocery chains for food shopping was gaining momentum, but only amongst those who could afford it. 

iv. Technology

Owning to the depressed economic and social state of the country, the technological advances were also in a similar state. The country had not progressed towards channels of modern trade that included reliance on the internet for example. The country was also deprived of more developed retail settings that employed modern technology.

v. Legal

The legal environment of the country was weak as is seen clearly through the protests and attacks on Sainsbury’s stores in the country. The ale enforcement institution was corrupt and sided with the stronger political parties in the society. Moreover, as seen through the cartel formulation against Sainsbury, it is safe to state that there were no competitive regulations either.